TrustCo Bank Corp NY (TRST) Bundle
Understanding TrustCo Bank Corp NY (TRST) Revenue Streams
Understanding TrustCo Bank Corp NY’s Revenue Streams
The primary revenue sources for TrustCo Bank Corp NY consist mainly of interest income from loans and non-interest income from various banking services. The breakdown of these revenue streams is as follows:
- Net Interest Income: $113.0 million for the nine months ended September 30, 2024, compared to $133.2 million for the same period in 2023.
- Non-Interest Income: $15.4 million for the nine months ended September 30, 2024, compared to $13.8 million for the same period in 2023.
The contribution of different business segments to overall revenue includes:
- Interest and Fees on Loans: $152.6 million for the nine months ended September 30, 2024.
- Fees for Services to Customers: $7.6 million for the nine months ended September 30, 2024.
- Trustco Financial Services Income: $5.5 million for the nine months ended September 30, 2024.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate shows a decline in net interest income, reflecting a decrease of 15.2% from the previous year. However, non-interest income increased by 11.6%.
| Period | Net Interest Income ($ million) | Non-Interest Income ($ million) | Total Revenue ($ million) |
|---|---|---|---|
| 9/30/2024 | 113.0 | 15.4 | 128.4 |
| 9/30/2023 | 133.2 | 13.8 | 147.0 |
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, net interest income was reported at $38.7 million, up from $37.8 million in the previous quarter, reflecting a growth rate of 2.3%. This increase was driven by:
- Loan growth at higher interest rates.
- Lower cost of deposits.
However, it was partially offset by lower investment earnings and a decrease in interest on federal funds sold and other short-term investments.
The net interest margin for the third quarter of 2024 was 2.61%, up 8 basis points from the previous quarter, while the yield on interest-earning assets increased to 4.11%.
Contribution of Different Business Segments to Overall Revenue
The average loan portfolio saw an increase of $127.0 million or 2.6% in the third quarter of 2024 compared to the same period in 2023. Below is a summary of the average loan growth:
| Loan Type | Average Balance ($ million) | Year-over-Year Change ($ million) | Percentage Change (%) |
|---|---|---|---|
| Residential Loans | 4,375.6 | 50.4 | 1.2 |
| Home Equity Lines of Credit | 380.4 | 60.0 | 18.7 |
| Commercial Loans | 18.1 | 6.9 | 6.9 |
Overall, the Bank's ability to retain deposits while lowering rates on time deposits has contributed positively to its net interest income. The proactive approach in encouraging customers to utilize existing home equity lines of credit has also supported revenue growth.
A Deep Dive into TrustCo Bank Corp NY (TRST) Profitability
Profitability Metrics
Gross Profit Margin: The gross profit margin for the third quarter of 2024 was 61.5%, a decrease from 63.5% in the third quarter of 2023.
Operating Profit Margin: The operating profit margin for the third quarter of 2024 was 32.0%, down from 35.0% in the same quarter last year.
Net Profit Margin: The net profit margin for the third quarter of 2024 stood at 33.4%, compared to 34.8% in the third quarter of 2023.
Trends in Profitability Over Time
| Metric | Q3 2024 | Q3 2023 | Q2 2024 |
|---|---|---|---|
| Gross Profit Margin | 61.5% | 63.5% | 62.2% |
| Operating Profit Margin | 32.0% | 35.0% | 33.5% |
| Net Profit Margin | 33.4% | 34.8% | 32.8% |
Comparison of Profitability Ratios with Industry Averages
The average gross profit margin in the banking industry is approximately 70%, while the operating profit margin averages around 35%. The net profit margin for the industry stands at 25%. This indicates that the bank's gross profit margin is 8.5% lower than the industry average, the operating profit margin is 3% lower, while the net profit margin is 8.4% higher than the industry average.
Analysis of Operational Efficiency
The efficiency ratio for the third quarter of 2024 was 59.65%, reflecting a decrease from 62.84% in the second quarter of 2024. This indicates improved cost management, as a lower efficiency ratio suggests that the bank is generating more income per dollar of expense.
Non-interest expenses for the third quarter of 2024 totaled $26.2 million, down from $27.5 million in the third quarter of 2023. This reduction in expenses contributed positively to the profitability metrics.
| Efficiency Metrics | Q3 2024 | Q3 2023 | Q2 2024 |
|---|---|---|---|
| Efficiency Ratio | 59.65% | 58.33% | 62.84% |
| Non-Interest Expenses | $26.2 million | $27.5 million | $26.5 million |
Debt vs. Equity: How TrustCo Bank Corp NY (TRST) Finances Its Growth
Debt vs. Equity: How TrustCo Bank Corp NY Finances Its Growth
Debt Levels: As of September 30, 2024, the total liabilities of TrustCo Bank Corp NY stood at $5,412,778 thousand, which includes $4,590,112 thousand in total interest-bearing liabilities. The breakdown of these liabilities includes:
| Type of Liability | Amount (in thousands) |
|---|---|
| Interest-bearing checking accounts | $1,000,333 |
| Money market accounts | $499,408 |
| Savings accounts | $1,122,673 |
| Time deposits | $1,880,021 |
| Short-term borrowings | $87,677 |
| Total interest-bearing liabilities | $4,590,112 |
The company has consistently maintained a balance between long-term and short-term debt, with a focus on securing funding through various deposit products.
Debt-to-Equity Ratio: The debt-to-equity ratio for TrustCo Bank Corp NY is calculated as follows:
Debt-to-Equity Ratio = Total Liabilities / Shareholders' Equity
As of September 30, 2024, the shareholders' equity amounted to $661,624 thousand. Thus, the debt-to-equity ratio is:
Debt-to-Equity Ratio = $5,412,778 / $661,624 = 8.18
This ratio is significantly higher than the industry average of approximately 1.2-1.5, indicating a higher reliance on debt financing compared to equity.
Recent Debt Issuances and Credit Ratings: TrustCo Bank has not conducted any new debt issuances in recent quarters. The bank maintains a solid credit profile, with a credit rating of Baa1 from Moody's, reflecting stable outlook conditions.
Balancing Debt Financing and Equity Funding: TrustCo Bank Corp NY has effectively balanced its debt financing and equity funding through strategic management of its deposit base and equity. The company has focused on enhancing customer relationships to retain deposits while maintaining competitive interest rates. The equity to assets ratio stands at 10.95% as of September 30, 2024, compared to 10.31% in the previous year.
This approach has allowed the bank to manage its capital structure efficiently while pursuing growth opportunities in its lending portfolio.
Assessing TrustCo Bank Corp NY (TRST) Liquidity
Assessing TrustCo Bank Corp NY's Liquidity
Current Ratio: The current ratio as of September 30, 2024, is 0.99, calculated as total current assets of $522,965,000 divided by total current liabilities of $528,092,000.
Quick Ratio: The quick ratio is approximately 0.09, derived from liquid assets ($522,965,000 in cash and equivalents) excluding inventories divided by current liabilities.
Analysis of Working Capital Trends
As of September 30, 2024, working capital has decreased, indicating potential liquidity concerns. The total current assets stand at $522,965,000 while total current liabilities are $528,092,000, resulting in a working capital deficit of approximately $5,127,000.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities was $37,552,000.
Investing Cash Flow: The net cash used in investing activities for the same period was ($18,000,000), primarily due to purchases of securities.
Financing Cash Flow: Net cash used in financing activities was ($16,000,000), reflecting dividends paid and repayment of borrowings.
Potential Liquidity Concerns or Strengths
With a current ratio of 0.99 and a quick ratio of 0.09, the liquidity position indicates potential concerns. The working capital deficit of $5,127,000 suggests that current liabilities exceed current assets, which may impact short-term operational capabilities.
| Liquidity Metric | Value |
|---|---|
| Current Assets | $522,965,000 |
| Current Liabilities | $528,092,000 |
| Current Ratio | 0.99 |
| Quick Ratio | 0.09 |
| Working Capital | ($5,127,000) |
| Operating Cash Flow (9M 2024) | $37,552,000 |
| Investing Cash Flow (9M 2024) | ($18,000,000) |
| Financing Cash Flow (9M 2024) | ($16,000,000) |
The analysis indicates a need for caution regarding liquidity management, particularly in meeting short-term obligations while maintaining operations effectively.
Is TrustCo Bank Corp NY (TRST) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether TrustCo Bank Corp NY (TRST) is overvalued or undervalued, we will analyze key financial ratios, stock performance, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of the latest reporting period is calculated using the trailing twelve months (TTM) earnings. For the third quarter of 2024, the diluted earnings per share (EPS) were $0.68. With a market price of $33.07 at the end of September 2024, the P/E ratio is:
P/E Ratio = Market Price / EPS = $33.07 / $0.68 = 48.66
Price-to-Book (P/B) Ratio
The P/B ratio is calculated by taking the market price and dividing it by the book value per share. As of September 30, 2024, the book value per share is $35.19.
P/B Ratio = Market Price / Book Value = $33.07 / $35.19 = 0.94
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EBITDA for the last twelve months is not explicitly provided, but we can estimate it from net income and interest, taxes, depreciation, and amortization adjustments. Assuming a net income of $37.6 million for the nine months ended September 30, 2024, with an estimated annual EBITDA of $50 million:
EV = Market Capitalization + Total Debt - Cash
Market Cap = 33.07 19,010 = $628.9 million
Assuming total debt of $50 million and cash of $522.965 million:
EV = $628.9 million + $50 million - $522.965 million = $155.935 million
Thus, EV/EBITDA = $155.935 million / $50 million = 3.12
Stock Price Trends
The stock price has shown the following trends over the last 12 months:
- September 2023: $27.29
- December 2023: $28.77
- June 2024: $34.46
- September 2024: $33.07
This represents a 21% increase from September 2023 to September 2024.
Dividend Yield and Payout Ratios
The annual dividend is $1.08 with a current stock price of $33.07, resulting in a dividend yield of:
Dividend Yield = Annual Dividend / Stock Price = $1.08 / $33.07 = 3.26%
The dividend payout ratio is calculated as:
Payout Ratio = Annual Dividend / EPS = $1.08 / $2.04 (estimated annual EPS) = 53.16%
Analyst Consensus
As of the latest reports, the consensus rating among analysts for TrustCo Bank Corp NY is:
- Buy: 3 analysts
- Hold: 2 analysts
- Sell: 1 analyst
Summary Table of Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 48.66 |
| P/B Ratio | 0.94 |
| EV/EBITDA | 3.12 |
| Stock Price (Sept 2024) | $33.07 |
| Dividend Yield | 3.26% |
| Dividend Payout Ratio | 53.16% |
| Analyst Consensus | Buy (3), Hold (2), Sell (1) |
Key Risks Facing TrustCo Bank Corp NY (TRST)
Key Risks Facing TrustCo Bank Corp NY
Overview: TrustCo Bank Corp NY faces a variety of internal and external risks that could impact its financial health. These include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The banking sector remains highly competitive, particularly in the markets where TrustCo operates. The institution must continuously adapt to competitors offering higher interest rates on deposits and more attractive loan products. As of September 30, 2024, the cost of interest-bearing liabilities was 1.94%, down from 1.97% in the previous quarter.
Regulatory Changes
Regulatory scrutiny in the banking industry can pose significant risks. Changes in regulations regarding capital requirements and lending practices can affect profitability. The consolidated equity to assets ratio improved to 10.95% as of September 30, 2024, from 10.31% a year earlier.
Market Conditions
Fluctuations in market conditions, particularly interest rates, can impact TrustCo's profitability. The net interest margin for the third quarter of 2024 was 2.61%, slightly up from 2.53% in the second quarter. The Federal Reserve's decisions regarding interest rates will directly affect the bank's ability to manage deposit costs effectively.
Operational Risks
Operational risks, including system failures and fraud, can affect TrustCo's performance. The bank reported total noninterest expenses of $26.2 million for the third quarter 2024, indicating ongoing efforts to control costs.
Financial Risks
Financial risks include credit risk, where borrowers may default on loans. The provision for credit losses was recorded at $500,000 in the third quarter of 2024, up from $100,000 in the previous year. The allowance for credit losses on loans was $50 million, representing 0.99% of total loans.
Strategic Risks
Strategic risks involve the bank’s long-term plans and can be influenced by changes in customer preferences and technology. TrustCo has focused on retaining deposits while lowering rates on time deposits, which has been effective in maintaining customer relationships.
Mitigation Strategies
To mitigate these risks, TrustCo is employing several strategies:
- Maintaining a strong capital position with a consolidated equity to assets ratio of 10.95%.
- Focusing on customer relationships to retain deposits and encourage the use of home equity lines of credit.
- Implementing cost control measures to keep noninterest expenses in check.
| Risk Factor | Details | Current Metric |
|---|---|---|
| Cost of Interest-Bearing Liabilities | Decrease in cost due to competitive measures | 1.94% |
| Net Interest Margin | Profitability from interest income versus interest expense | 2.61% |
| Provision for Credit Losses | Buffer against potential loan defaults | $500,000 |
| Allowance for Credit Losses on Loans | Protection against loan defaults | $50 million (0.99% of total loans) |
| Total Noninterest Expenses | Expenses that do not generate interest income | $26.2 million |
Future Growth Prospects for TrustCo Bank Corp NY (TRST)
Future Growth Prospects for TrustCo Bank Corp NY (TRST)
Key Growth Drivers
- Product Innovations: The bank has focused on promoting home equity lines of credit (HECLs), resulting in a significant increase of 18.7% year-over-year in outstanding HECL balances, totaling $380.4 million as of September 30, 2024.
- Market Expansions: TrustCo operates 138 offices across New York, New Jersey, Vermont, Massachusetts, and Florida, providing a strong regional presence to tap into growing customer bases.
- Acquisitions: There have been no recent acquisitions reported, but the bank's strategy focuses on organic growth through enhanced customer service and product offerings.
Future Revenue Growth Projections
For the third quarter of 2024, the bank reported a net interest income of $38.7 million, an increase of 2.3% from the previous quarter. The average loans increased by $127 million or 2.6% year-over-year. Analysts project a steady revenue growth trajectory, with expectations of net interest income continuing to rise due to loan growth and a favorable interest rate environment.
Earnings Estimates
Net income for the third quarter of 2024 was reported at $12.9 million, or $0.68 diluted earnings per share, compared to $14.7 million or $0.77 diluted earnings per share in the same period of 2023. For the nine months ended September 30, 2024, net income totaled $37.6 million, down from $48.9 million for the same period in 2023.
Strategic Initiatives or Partnerships
The bank is enhancing its product offerings to meet customer needs, particularly in the area of home equity products, where origination of purchase mortgages has been lagging. This strategic focus aims to increase utilization of existing HECLs and promote customer retention.
Competitive Advantages
- The bank's conservative banking approach has fostered a strong customer trust, leading to a 6.2% increase in consolidated equity to assets, reaching 10.95% as of September 30, 2024.
- Strong asset quality is evidenced by a nonperforming loans ratio of 0.38% and a coverage ratio of 256.9%.
- The bank's ability to retain deposits while lowering rates on time deposits has contributed to a lower cost of funds, enhancing profitability.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Interest Income | $38.7 million | $37.8 million | +2.3% |
| Net Income | $12.9 million | $14.7 million | -12.2% |
| Earnings per Share | $0.68 | $0.77 | -11.7% |
| Average Loans | $5.0 billion | $4.9 billion | +2.6% |
| Home Equity Lines of Credit | $380.4 million | $320.4 million | +18.7% |
| Return on Average Equity | 7.74% | 7.76% | -0.3% |
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Article updated on 8 Nov 2024
Resources:
- TrustCo Bank Corp NY (TRST) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of TrustCo Bank Corp NY (TRST)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View TrustCo Bank Corp NY (TRST)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.